AGREEMENT TO CONVERT NOTE
This Agreement to Convert Note ("Agreement") is made as of May __, 2005 by
and between Excalibur Industries, Inc., a Delaware corporation (the "Company"),
with its principal office at 00000 XX 0000, Xxxxxx, Xxxxx 00000, and
___________________________ (the "Investor").
R E C I T A L S
A. On ___________________ (the "Investment Date"), the Investor loaned
$______________ to the Company, such loan being evidenced by a ___ percent (__%)
promissory note dated _____________ in the original principal amount of
________________________ ($__________) (the "Note"). The accrued interest on the
Note as of June 30, 2005 will be $----------.
B. The Company has defaulted on repayment of the Note.
C. The Note is subordinate in payment to various notes issued to
Stillwater National Bank Stillwater National Bank & Trust Company, a national
banking association (collectively, the "Bank Notes") made by Excalibur Holdings,
Inc., a Texas corporation and wholly-owned subsidiary of the Company
("Holdings"), and guaranteed by the Company.
D. The Company and Holdings desire to enter into a plan of
reorganization with the Bank in order to restructure the Bank Notes (the
"Plan"). The principal terms of the proposed Plan are attached hereto as Exhibit
A. A reorganization that occurs on terms that do not materially differ from the
Plan shall be referred to as a "Reorganization."
E. The Company and the Investor desire that, in connection with and
subject to the condition that the Company, Holdings, and the Bank enter into the
Plan and close a Reorganization, the principal and interest due under the Note
be converted into shares of the Company's common stock, par value $0.001 per
share ("Common Stock") and resolve other matters under the terms and conditions
set forth herein.
A G R E E M E N T
It is agreed as follows:
1. CONVERSION OF NOTE.
1.1 Conversion of Note. Upon the closing of a Reorganization
pursuant to the Plan, the Company shall convert the entire outstanding principal
amount of the Note plus accrued and unpaid interest thereon into a number of
shares of Common Stock (the "Conversion Shares") equal to the quotient obtained
by dividing the dollar amount of such outstanding principal amount of this Note
plus the accrued and unpaid interest thereon being converted by $1.00 per share
(the "Conversion Price").
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1.2 Escrow and Surrender of Note. Concurrently with the execution
of this Agreement, Investor shall place the original Note in escrow with the
Company's counsel. Upon the closing of a Reorganization, the Company shall
deliver the certificates representing the Conversion Shares to each Investor.
Upon delivery of the certificate(s) representing the Conversion Shares, the
original Note shall be released from escrow to the Company.
1.3 Conversion Conditioned on Reorganization; Termination. The
conversion set forth herein shall occur if, and only if, there is a closing of a
Reorganization pursuant to the Plan. In the event that a closing of a
Reorganization pursuant to the Plan does not occur on or before September 30,
2005, this Agreement shall terminate, the Company's counsel shall return the
original Note to the Investor, and no conversion pursuant to this Agreement
shall occur.
2. COVENANTS.
2.1 No Adjustments. It is anticipated that the Company may
combine, by way of reverse stock split, the outstanding shares of Common Stock
into a smaller number of shares. It is hereby understood that the Conversion
Price set forth in Section 1.1 SHALL NOT be adjusted if the Company, at any time
while this Agreement is in effect, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of shares, (c)
combine (including by way of reverse stock split) outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification of
shares of the Common Stock any shares of capital stock of the Maker.
2.2 Fractional Shares. Upon a conversion hereunder the Company
shall not be required to issue stock certificates representing fractions of
shares of the Common Stock, but may if otherwise permitted, make a cash payment
in respect of any final fraction of a share based on the market value of such
fraction of shares of Common Stock at such time. If the Company elects not, or
is unable, to make such a cash payment, the Investor shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
2.3 Taxes. The issuance of certificates for shares of the Common
Stock on conversion of the principal amount and interest outstanding under this
Note shall be made without charge to the Payee for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate.
2.4 Holding Period. The Company agrees and stipulates that, for
purposes of Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act"), the Conversion Shares are deemed to have been acquired by the Investor on
the Investment Date, pursuant to Rule 144(d)(3)(ii) of the Securities Act.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants that the following statements are true
and correct in all material respects as of the date hereof and will be true and
correct in all material respects at Closing, except as expressly qualified or
modified herein.
3.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power and authority to enter into and
perform its obligations under this Agreement, and to own its properties and to
carry on its business as presently conducted and as proposed to be conducted.
The Company is duly qualified to do business as a foreign corporation in every
jurisdiction in which the failure to so qualify would have a material adverse
effect upon the Company.
3.2 Validity of Transactions. This Agreement, and each document
executed and delivered by the Company in connection with the transactions
contemplated by this Agreement, including this Agreement, have been duly
authorized, executed and delivered by the Company and is each the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency reorganization and
moratorium laws and other laws affecting enforcement of creditor's rights
generally and by general principles of equity.
3.3 Valid Issuance of Conversion Shares. The Conversion Shares,
when issued and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer, other than restrictions on
transfer under this Agreement and under applicable federal and state securities
laws, will be free of all other liens and adverse claims.
3.4 No Violation. The execution, delivery and performance of this
Agreement has been duly authorized by the Company's Board of Directors and will
not violate any law or any order of any court or government agency applicable to
the Company, as the case may be, or the Articles of Incorporation or Bylaws of
the Company, and will not result in any breach of or default under, or, except
as expressly provided herein, result in the creation of any encumbrance upon any
of the assets of the Company pursuant to the terms of any agreement or
instrument by which the Company or any of its assets may be bound. No approval
of or filing with any governmental authority is required for the Company to
enter into, execute or perform this Agreement.
3.5 SEC Reports and Financial Statements.
3.5.1 The Company has delivered or made available to the
Investor accurate and complete copies (excluding copies of exhibits)
of each report, registration statement and definitive proxy
statement filed by the Company with the SEC since April 5, 2002
(collectively, with all information incorporated by reference
therein or deemed to be incorporated by reference therein, the "SEC
Reports"). All statements, reports, schedules, forms and other
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documents required to have been filed by the Company with the SEC
have been so filed on a timely basis, except as indicated in such
SEC Reports. As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the SEC
Reports complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "1933
Act"), or the Securities Exchange Act of 1934, as amended (the "1934
Act"); and (ii) none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
3.5.2 Except for the pro forma financial statements, the
consolidated financial statements contained in the SEC Reports: (i)
complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as may be indicated in the
notes to such financial statements and, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC, and except that
unaudited financial statements may not contain footnotes and are
subject to normal and recurring year-end audit adjustments which
will not, individually or in the aggregate, be material in amount);
and (iii) fairly present, in all material respects, the consolidated
financial position of the Company and its consolidated subsidiaries
as of the respective dates thereof and the consolidated results of
operations of the Company and its consolidated subsidiaries for the
periods covered thereby. All adjustments considered necessary for a
fair presentation of the financial statements have been included.
3.6 Securities Law Compliance. The offer, issue, sale and delivery
of the Conversion Shares will constitute an exempted transaction under the
Securities Act, and registration of the any of the Conversion Shares under the
Securities Act is not required. The Company shall make such filings as may be
necessary to comply with the Federal securities laws and the Blue Sky laws of
any state, which filings will be made in a timely manner.
3.7 Resales Under Rule 144. With a view to making available to the
Investor the benefits of Rule 144 promulgated under the 1933 Act ("Rule 144")
and any other rule or regulation of the SEC that may at any time permit the
Investor to sell Conversion Shares to the public without registration, the
Company will do all of the following:
3.7.1 use its commercial best efforts to make and keep public
information available, as those terms are understood and defined in
Rule 144;
3.7.2 take such action, including compliance with the
reporting requirements of section 13 or 15(d) of the 1934 Act, as is
necessary to enable the Investor to utilize Rule 144;
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3.7.3 file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the
1934 Act; and
3.7.4 furnish to the Investor, so long as the Investor owns
any Conversion Shares, forthwith upon written request:
(1) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144,
the 1933 Act and the 1934 Act (at any time after it has
become subject to such reporting requirements);
(2) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so
filed by the Company;
(3) an opinion of the Company's counsel that the
Conversion Shares may be resold in the absence of an
effective registration thereof under the Securities Act
pursuant to Rule 144; and
(4) such other documents as may be reasonably requested
in availing the Investor of any rule or regulation of
the SEC that permits the selling of any such Conversion
Shares without registration or pursuant to such form.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby represents, warrants and covenants with the Company as
follows:
4.1 Legal Power. The Investor has the requisite power and is
authorized to enter into this Agreement and to carry out and perform its
obligations under the terms of this Agreement.
4.2 Due Execution. This Agreement has been duly authorized,
executed and delivered by the Investor, and, upon due execution and delivery by
the Company, this Agreement will be a valid and binding agreement of the
Investor.
4.3 Restricted Securities.
4.3.1 The Investor has been advised that the Conversion Shares
have not been registered under the Securities Act or any other
applicable securities laws. The Investor acknowledges that the
Conversion Shares may be issued as "restricted securities" as
defined by Rule 144 promulgated pursuant to the Securities Act. The
Conversion Shares may not be resold in the absence of an effective
registration thereof under the Securities Act and applicable state
securities laws unless, in the opinion of the Company's counsel, an
applicable exemption from registration is available.
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4.3.2 The Investor understands and acknowledges that the
Conversion Shares, when issued, may bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION THEREOF UNDER THE
SECURITIES ACT OF 1933 AND/OR THE SECURITIES ACT OF
ANY STATE HAVING JURISDICTION OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware.
5.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto.
5.3 Entire Agreement. This Agreement and the Exhibits hereto and
thereto, and the other documents delivered pursuant hereto and thereto,
constitute the full and entire understanding and agreement among the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties, covenants, or
agreements except as specifically set forth herein or therein. Nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
5.4 Severability. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
5.5 Amendment and Waiver. Except as otherwise provided herein, any
term of this Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and the Investor. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each future holder of any security purchased under this Agreement
(including securities into which such securities have been converted) and the
Company.
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5.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be effective when delivered
personally, or sent by telex or telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested) in each case to the appropriate
address set forth below:
If to the Company: Excalibur Industries, Inc.
00000 XX 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx,
Chief Financial Officer
If to the Investor: ______________________
______________________
______________________
5.7 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
INVESTOR
-------------------------
By:
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COMPANY
EXCALIBUR INDUSTRIES, INC.
By:
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Xxxxxxx X. Xxxxxxxx,
Chief Financial Officer
EXHIBIT A
PROPOSED PLAN OF REORGANIZATION
